7 Facts on Last Quarter's Performance – The Fool Motley

Last October, a national market for recreational marijuana for adults opened in Canada. The growing demand from consumers wanting to take their shopping out of the box is making Canadian cannabis companies grow in revenue. Investors have already had a glimpse of how the leisure market is playing out Cover growth and Aurora Cannabisand on Thursday they also discovered how their smallest competitor hexo(NYSEMKT: HEXO) made. Here are seven facts on the financial performance of HEXO to know for the second fiscal quarter.

1: Sales growth is breathtaking

The gross income of HEXO in the last quarter was C $ 16.2 million, a remarkable increase of 1,269% over last year and 144% over the previous quarter. Excluding excise taxes, net sales were $ 13.4 million, up from $ 1.2 million in the same quarter last year.

Source of the image: Getty Images.

2: Quebec is king

The leisure market is the main reason for the increase in HEXO's revenues. He sold cannabis in three provinces in the last quarter, including Quebec, where he signed a five-year deal to sell 20,000 pounds in the first year of the adult market. Quebec generated 84% of US $ 12.2 million generated by HEXO from the adult market.

Quebec is likely to continue to account for a significant portion of HEXO sales. HEXO plans to supply 35,000 kg in the second year and 45,000 kg of marijuana in the third year of adult sales. The quantity supplied in the last two years of his preferred supplier contract will be determined at a later date, but HEXO estimates that it can supply more than 203,950 kilos in Quebec over a five-year period.

3: production increases

To meet its obligations, HEXO increases its production. It currently produces 250,000 square feet, but its 1,000,000 square foot expansion program is expected to bring the annual capacity of dried flowers to 108,000 pounds per year. The strategy is already running. Last quarter, HEXO's marijuana production increased 39% to 4,938 kilos.

SOURCE OF IMAGE: GETTY IMAGES.

4: Prices are stable

Dried flower prices are generally lower than those of extracts, such as oils, so companies have focused on choosing their product mixes, especially since dried flower prices are lower in the market. recreation than in the medical marijuana market. .

Last quarter, HEXO was able to sell more cannabis oil and its average price per gram improved. Oils accounted for 23% of its adult use income, up from 19% previously. This resulted in an increase in revenue per gram equivalent, including excise taxes, from $ 5.45 to $ 5.83 in the previous quarter.

5: Losses increase

According to the United Nations, the global marijuana market is worth $ 150 billion. As a result, HEXO and its peers can not be too blamed for aggressively spending to build leadership from the start. Nevertheless, the losses are increasing and the expenses will not slow down anytime soon.

Management spent $ 18.5 million in operating expenses in the last quarter, up from $ 5.5 million a year ago. Marketing and promotion expenses increased from $ 1.4 million to $ 4.8 million. General administrative costs increased from $ 1.8 million to $ 8.2 million. And stock-based compensation expenses increased from $ 2 million to $ 5 million. HEXO recorded an operating loss of C $ 6.9 million for the quarter.

Management expects general and administrative expenses to "increase significantly" in fiscal year 2020, so investors should expect additional profits.

6: The global offers of HEXO

HEXO has recently made some financial efforts to strengthen its market share. Last quarter, it acquired a 33% stake in HEXOMed, a Greek-based company that will attempt to capitalize on the growing legalization efforts in Europe. This week, she announced the surrender of approximately $ 263 million worth of shares to acquire Newstrike Brands. Newstrike licenses HEXO to supply eight of Canada's ten provinces and infrastructure, increasing its planned marijuana production capacity to 150,000 pounds per year.

Management has also taken steps to give it access to more money that it could use to fuel its growth plans. He raised C $ 54.2 million through a call for tenders in the last quarter, after deducting fees. It has also entered into a $ 65 million credit facility that can be increased by $ 135 million.

Source of the image: Getty Images.

7: The prospects are good

The company expects its turnover to be roughly in line with the previous quarter, but expects a sharp increase in its sales later in 2019 due to the fact that it is expected to be in business. increase in online production capacity. In the fourth quarter of the fiscal year, net revenues are expected to "roughly double" from the previous year's forecast of $ 13.4 million, and for fiscal year 2020, management was targeting $ 400 million in revenues. dollars, excluding excise taxes.

With such a forecast, investors should take notice. This type of growth could make HEXO one of the best marijuana stocks in Canada.